1
EXHIBIT 10.07
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
OF
XXX X. XXXXX
This Amended and Restated Employment Agreement ("Agreement") is entered
into between ENVOY Corporation, a Tennessee corporation ("Company"), and Xxx X.
Xxxxx, a resident of Nashville, Davidson County, Tennessee ("Executive"),
effective as of March 30, 1999. The Company and the Executive are sometimes
referred to herein as the "Parties."
1. Introduction: The Company and Quintiles Transnational Corp. ("Quintiles")
entered into an Amended and Restated Agreement and Plan of Merger among
Quintiles Transnational Corp., QELS Corp. and ENVOY Corporation dated as of
December 15, 1998 (the "Merger Agreement") pursuant to which, among other
things, Quintiles has agreed to acquire ENVOY through the merger of QELS Corp.
with and into ENVOY, as provided therein, with ENVOY continuing as the surviving
corporation and a wholly-owned subsidiary of Quintiles. The Company and
Executive are parties to an Amended and Restated Employment Agreement dated
January 1, 1994, amended by an Addendum effective as of January 1, 1994. The
Company believes that the assurance of the Executive's continued employment by
the Company and the benefit of his business experience are of material
importance. Therefore, the Company and the Executive intend by this Agreement to
amend the existing employment agreement and to specify the terms and conditions
of the Executive's continuing employment relationship with the Company.
2. Employment: The Company hereby employs the Executive and the Executive hereby
accepts continuing employment with the Company upon the terms and conditions set
forth herein.
3. Duties and Responsibilities:
3.1 Extent of Service: The Executive shall, during the term of this
Agreement, devote such of his entire time, attention, energies and business
efforts to his duties as an executive of the Company as are reasonably necessary
to carry out his duties specified in Paragraph 3.2 below. The Executive shall
not, during the term of this Agreement, engage in any other business activity
(whether or not such business activity is pursued for gain, profit or other
pecuniary advantage) if such business activity would impair the Executive's
ability to carry out his duties hereunder. This Paragraph 3.1, however, shall
not be construed to prevent the Executive from investing his personal assets as
a passive investor.
3.2 Position and Duties: Subject to the power of the Board of Directors
of the Company to elect and remove officers and the power of the stockholders to
remove directors, the Executive shall serve the Company as Chief Executive
Officer; and shall perform, faithfully and diligently, the services and
functions relating to such office or otherwise reasonably incident to such
office as may be designated from time to time by the Board of Directors of the
Company; provided that all such services and functions shall be reasonable and
within the Executive's area
2
of expertise; and provided further that the Executive shall be physically
capable of performing the same.
During the Term (as defined below), the Executive has the sole
authority within the Company to terminate the employment of any Continuing
Employee (defined in Section 6.17(a) of the Merger Agreement) at any time,
subject only to the superior authority of the Quintiles Board of Directors or
the Compensation Committee of the Quintiles Board of Directors to initiate by
its own determination of facts such a termination, or to overrule a termination
planned or announced by the Executive.
3.3 Place of Employment: During the term of this Agreement, the Company
shall maintain its principal executive offices in the Nashville, Tennessee area,
and the Executive's primary place of employment shall be at such principal
executive offices. During the term of this Agreement, the Company will provide
the Executive with a private office, an executive secretary and other customary
staff support services, all as are commensurate with the services and functions
to be performed by him hereunder.
4. Salary and Other Benefits: Subject to the terms and conditions of this
Agreement;
4.1 Salary: As compensation for his services hereunder and during the
term of his employment under this Agreement, the Executive shall be paid an
annual salary of not less than $262,000, payable in accordance with the then
current payroll policies of the Company. Such salary shall be reviewed annually
by the Board of Directors of the Company (or the appropriate committee thereof).
The annual salary payable from time to time by the Company to the Executive
pursuant to this Paragraph 4.1 is herein sometimes referred to as his "Base
Salary."
4.2 Other Benefits: As long as the Executive is employed by the
Company, the Executive shall be entitled to receive the following benefits in
addition to his Base Salary:
(a) Except to the extent the Parties may agree otherwise
subsequent to the date hereof, for each of the years 1999, 2000, and
2001, the Executive shall be entitled to receive: (1) a guaranteed cash
bonus of $238,000 ("Cash Bonus") to be paid on or about March 31st of
the year following the year Executive earned such Cash Bonus; and (2)
an option ("Option") to purchase common stock of the Company, which
Option shall have a Black-Scholes value of $450,000, based on the
closing price of the Company's common stock on the Date of Grant, which
shall be December 31 of the applicable year. The exercise price of the
Option will be equal to the closing price of the Company's common stock
on the Date of Grant. On each of the first four anniversaries of the
Date of Grant, respectively, 25 percent (25%) of the Option shall vest,
such that the Option shall be 100 percent (100%) vested on the fourth
anniversary of the Date of Grant for each Option. The vested portion of
the Option will be exercisable up to ten (10) years from the Date of
Grant, provided the Executive remains actively employed by the Company
during that period.
2
3
The Executive shall be deemed to participate in the Quintiles
Executive Compensation Plan ("ECP") at a level equivalent to 2.5, and,
for each of the years 1999, 2000, and 2001, the Cash Bonus and Option
shall constitute the bonus and long-term incentive components,
respectively, of the ECP.
(b) The Executive shall have the right to participate in all
group benefit plans of the Company (including without limitation,
disability, accident, medical, life insurance, hospitalization and
pension), all in accordance with the Company's regular practices with
respect to its senior officers.
(c) The Executive shall be entitled to reimbursement from the
Company for reasonable out-of-pocket expenses incurred by him in the
course of the performance of his duties hereunder.
(d) The Executive shall receive an automobile allowance of
$10,000 per year, to be reviewed consistent with Quintiles ECP Level
2.5 incentives.
(e) In order to promote the interests of the Company, the
Company shall, to the extent consistent with Quintiles' policies
regarding ECP Level 2.5 executives, reimburse the Executive for the
initiation fees and all dues and assessments incurred by him in
connection with his membership in such luncheon clubs and country clubs
as may be chosen by the Executive (and, again to the extent consistent
with Quintiles' policy regarding ECP Level 2.5 executives, the Company
agrees to post any bond required by such clubs and each such bond will
remain the property of the Company).
(f) The Executive shall be entitled to such vacation, holidays
and other paid or unpaid leaves of absence as are consistent with the
Company's other officers. Executive shall be entitled to twenty-eight
(28) days of paid vacation each year. This vacation allowance shall be
cumulative from year to year, but shall be limited to three (3) years
accumulation. Executive recognizes the essential nature of his duties
and hereby agrees the maximum amount of vacation time to be taken shall
not exceed twenty-eight (28) consecutive days.
5. Term: The term of this Agreement shall be for three (3) years from the
Closing Date as defined in the Merger Agreement ("Term"). After expiration of
this Term, if the Company and the Executive agree to continue the Executive's
employment, the Executive agrees to execute an Executive Employment Agreement in
the form as is generally entered into by executives at the same ECP level.
Notwithstanding the foregoing, the indemnification provisions of this Agreement
contained in Paragraph 10 shall survive until the expiration of the statute of
limitations for assessment of any excise tax under Section 4999 of the Code with
regard to an Excess Parachute Payment on account of a Change of Control.
6. Termination and Resignation: The Company shall have the right to terminate
the Executive's employment hereunder at any time and for any reason, and upon
any such termination the Executive shall be entitled to receive from the Company
prompt payment of the
3
4
amount determined pursuant to the applicable subparagraph of Paragraph 7 below.
The Executive shall have the right to terminate his employment hereunder at any
time by resignation, and he shall thereupon be entitled to receive from the
Company payment of the amount determined pursuant to the applicable subparagraph
of Paragraph 7 below.
7. Payments Upon Termination and Resignation:
7.1 Contract Term Payments: Subject to the provisions of Paragraph 7.2,
if during the three (3) year term of this Agreement, the Company terminates
Executive's employment with the Company for any reason or Executive resigns for
any reason, then Executive shall be entitled to receive his Base Salary and Cash
Bonus for the remainder of the unexpired term of this Agreement, payable in the
same amounts and at the same times as if the Executive's employment had not
terminated.
7.2 Multiple Base Salary Payment: In lieu of the payment provided for
in Paragraph 7.1, if after the occurrence of an Initial Change in Control Event
of the Company, other than any Initial Change in Control Event arising out of
the transaction contemplated by the Merger Agreement, the Company terminates the
Executive's employment hereunder (a) because of a Discharge Event, or (b)
without Cause and without any Discharge Event, then in either case the Company
will pay to the Executive a lump sum termination payment equal to 2.99 times the
sum of his Base Salary and his Cash Bonus (collectively, the "Lump Sum
Payment"). In lieu of the payment provided in Paragraph 7.1, if after the
occurrence of a Change in Control of the Company, other than the Change in
Control effected by the transaction contemplated by the Merger Agreement, (a)
the Company terminates the Executive's employment hereunder for any reason other
than for Cause (other than his death or disability), or (b) the Executive
voluntarily resigns his employment hereunder for any reason (other than his
death or disability), then in each case the Company will pay to the Executive
the Lump Sum Payment. Notwithstanding the foregoing, the Company shall not pay
any Lump Sum Payment or other termination payment to Executive pursuant to this
Paragraph 7.3 if, after termination of employment with the Company, the
Executive is employed by a newly created subsidiary formed to continue the
health care services business of the Company, the stock of which subsidiary is
distributed to the shareholders of Quintiles, and this newly created subsidiary
assumes all obligations of the Company under this Agreement. Further,
notwithstanding the foregoing, Executive specifically agrees that, should his
employment hereunder terminate for any reason, he has no, and will claim no,
entitlement to the Lump Sum Payment by virtue of the Change in Control effected
by the transaction contemplated by the Merger Agreement.
7.3 Certain Definitions:
(a) Termination by the Company of the Executive's employment
for "Cause" shall mean termination upon the willful misappropriation of
funds or properties of the Company or the willful contravention of the
standards referred to in the last sentence of Paragraph 11 below. For
purposes of this definition, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted
to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or
4
5
omission was in the best interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters of the entire membership of the Board
of Directors of Quintiles ("Board") at a meeting of the Board duly
called and held (after reasonable notice to the Executive and an
opportunity for the Executive, together with his counsel, to be heard
before the Board) finding that in the good faith opinion of the Board
the Executive was guilty of the conduct set forth above and specifying
the particulars thereof in detail.
(b) "Cash Bonus" shall mean the $238,000 cash payment referred
to in Paragraph 4.2(a).
(c) A "Change in Control" shall be conclusively deemed to have
occurred if (and only if) any of the following shall have taken place:
(i) a change in control is reported by Quintiles in response to either
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), or Item I
of Form 8-K promulgated under the Exchange Act; (ii) any person (as
such term is used in Sections 13 (d) and 14 (d) (2) of the Exchange
Act) is or becomes the beneficial owner (as defined in Rule l3d-3 under
the Exchange Act) directly or indirectly, of securities of Quintiles
representing forty percent or more of the combined voting power of
Quintiles then outstanding securities; (iii) the Company shall cease to
be a subsidiary (as defined under the Exchange Act) of Quintiles; or
(iv) following the election or removal of directors, a majority of the
Board consists of individuals who were not members of the Board two
years before such election or removal, unless the election of each
director who was not a director at the beginning of such two-year
period has been approved in advance by directors representing at least
a majority of the directors then in office who were directors at the
beginning of the two-year period.
(d) The "Code" shall refer to the Internal Revenue Code of
1986, as amended.
(e) A "Discharge Event" shall have occurred if the Executive
shall have received a copy of a resolution duly adopted by the
affirmative vote of a majority of the members of the Compensation
Committee of the Board finding that, upon the recommendation of and for
the reasons cited by the Chairman of the Company, the Executive is no
longer discharging his duties in a manner consistent with the effective
administration of the affairs of the Company and hence the continued
employment of the Executive is no longer in the best interest of the
Company.
(f) An "Initial Change in Control Event" shall be conclusively
deemed to have occurred when any individual, group, partnership,
corporation, trust or other entity ("Person") initiates a course of
action or conduct that, in the good faith judgment of the Board, might
reasonably be expected to lead to a Change in Control of Quintiles. For
example and without limiting the scope of the foregoing, an Initial
Change in Control Event would include the public announcement or other
disclosure by a Person of its
5
6
intention (i) to acquire by private or open market purchase, tender
offer, exchange offer, or otherwise forty percent or more of the
combined voting power of Quintiles' outstanding securities, or (ii) to
solicit proxies or consents for the removal of at least three incumbent
directors or the election of at least three persons to serve as
directors of Quintiles in opposition to nominees proposed by the Board
of Directors of Quintiles.
8. Acceleration of Options: Contemporaneously with the occurrence of a Change in
Control of the Company (including without limitation, the Change in Control
contemplated by the Merger Agreement) or Quintiles, the Board of Directors of
the Company or Quintiles (or the appropriate committee thereof) will accelerate
all outstanding options previously granted to the Executive under any then
existing Company or Quintiles stock option plan that are not otherwise
exercisable by the Executive at the time the Change in Control of the Company or
Quintiles occurs.
9. Tax Reimbursement Payment.
9.1 Notwithstanding anything to the contrary contained in this
Agreement, in any plan of the Company or Quintiles, or in any other agreement or
understanding, the Company will pay to the Executive, at the times herein
specified, an amount (the "Additional Amount") equal to the excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), if
any, incurred or to be incurred by the Executive by reason of the payments under
this Agreement, acceleration of vesting of stock options, stock appreciation
rights or restricted stock granted to Executive, or payments under any other
plan, agreement or understanding between the Executive and the Company or
Quintiles, constituting Excess Parachute Payments (as defined below), plus all
excise taxes and federal, state and local income taxes incurred or to be
incurred by the Executive with respect to receipt of the Additional Amount. For
purposes of this Agreement, the term "Excess Parachute Payment" shall mean any
payment or any portion thereof which would be an "excess parachute payment"
within the meaning of Section 280G(b) of the Code, and which would result in the
imposition of an excise tax on the Executive under Section 4999 of the Code.
Attached hereto as Exhibit A is an example illustrating the computation of the
Additional Amount.
9.2 All determinations required to be made regarding the Additional
Amount, including whether payment of any Additional Amount is required and the
amount of any Additional Amount, shall be made by the independent accounting
firm which is advising the Company (the "Accounting Firm"), which shall provide
detailed support calculations to the Company and the Executive on or before the
last day of the calendar year during which occurs the Change of Control (the
"Change of Control Year"). In computing taxes, the Accounting Firm shall use the
highest marginal federal, state and local income tax rates applicable to single
taxpayers for the year in which the Additional Amount is to be paid (unless,
within 30 days after the occurrence of the Change in Control the Executive
specifies in writing to the Company his marginal tax rate) and shall assume the
full deductibility of state and local income taxes for purposes of computing
federal income tax liability. The portion of the Additional Amount based on the
excise tax as determined by the Accounting Firm to be due for the Change of
Control Year shall be paid to the Executive no later than March 1 immediately
following the end of the Change
6
7
of Control Year. The portion of the Additional Amount based on the excise tax as
determined by the Accounting Firm to be due for each calendar year following the
Change of Control Year shall be paid to the Executive on or before March 1
immediately following the end of each such calendar year. If the Company
determines that the excise tax for any year will be different from the amount
originally calculated in the report of the Accounting Firm delivered at the end
of the Change of Control Year, then the Company shall provide to the Executive
detailed support calculations by the Accounting Firm specifying the basis for
the change in the Additional Amount.
10. Indemnification.
10.1 If the Executive shall have to institute litigation brought in
good faith to enforce any of his rights under the Agreement, the Company shall
indemnify the Executive for his reasonable attorney's fees and disbursements
incurred in any such litigation.
10.2 In the event that an excise tax is ever assessed by the Internal
Revenue Service against the Executive (or if the Company and the Executive
mutually agree that an excise tax is payable) by reason of the payment under
this Agreement, acceleration of vesting of stock options, stock appreciation
rights or restricted stock granted to Executive, or payments under any other
plan, agreement or understanding between the Executive and the Company or
Quintiles, as the case may be, constituting Excess Parachute Payments, and if
such excise tax was not included in the determination by the Accounting Firm of
the Additional Amount that has been actually paid to the Executive, the Company
agrees to indemnify the Executive by paying to the Executive the amount of such
excise tax, together with any interest and penalties, including reasonable legal
and accounting fees and other out-of-pocket expenses incurred by the Executive,
attributable to the failure to pay such excise tax by the date it was originally
due, plus all federal, state and local income taxes incurred with respect to
payment of the excise tax calculated in a manner analogous to Exhibit A. Upon
Executive's receipt from the Internal Revenue Service ("IRS ") of any deficiency
notice, notice of assessment or any other written communication relating to the
excise tax on Excess Parachute Payment, Executive shall give notice thereof to
the Company within ten business days of receipt thereof. In the event of any
dispute concerning the potential excise tax (including any administrative
proceedings within the IRS or court proceedings), the Company, as the
indemnifying party, shall be entitled to assume the defense of such a dispute or
proceeding, no compromise or settlement of such claim may be effected without
the Company's and Executive's mutual consent (which consents shall not be
unreasonably withheld) and the Company shall have no liability with respect to
any compromise or settlement of such claims effected without its consent. In
addition, in the event the Company assumes defense of any proceeding, the
Executive shall not be entitled to indemnification for outside legal fees and
expenses independently incurred by Executive. This indemnification obligation
shall survive the termination of the Agreement and shall apply to all such
excise taxes on Excess Parachute Payments, whether due before or after
termination of employment.
10.3 If the excise tax for any year which is actually imposed on the
Executive is finally determined to be less than the amount taken into account in
the calculation of the Additional Amount that was paid to the Executive pursuant
to Paragraph 9, then the Executive shall repay to
7
8
the Company, at the time that the amount of such reduction in excise tax is
finally determined, the portion of the Additional Amount attributable to such
reduction (including the portion of the Additional Amount attributable to the
excise tax and federal and state income taxes imposed on the Additional Amount
being repaid by the Executive, to the extent that such repayment results in a
reduction in such excise tax, federal or state income tax), plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B) of the
Code.
11. Preservation of Business, Fiduciary Responsibility: The Executive shall use
his best efforts to preserve the business and organization of the Company, to
keep available to the Company the services of present employees and to preserve
the business relations of the Company with suppliers, distributors, customers
and others. The Executive shall not commit any act, or in any way assist others
to commit any act, which would injure the Company. So long as the Executive is
employed by the Company, the Executive shall observe and fulfill proper
standards of fiduciary responsibility attendant upon his service and office.
12. Restrictive Covenants:
12.1 Covenants Against Competition: Executive acknowledges that (a) the
business of the Company and its affiliates, including Quintiles, is as described
in the most recent annual reports on Form 10-K as filed with the Securities and
Exchange Commission by both the Company and by Quintiles and, thereafter, as
described in each successive annual report on Form 10-K filed by Quintiles (the
"Company Business"); and (b) Executive's work for the Company will bring him
into close contact with many confidential matters not readily available to the
public.
12.2 Non-Compete: For a period of time (the "Restricted Period")
commencing on the date of this Agreement and continuing until the later of: (i)
the last day of the three (3) year term of this Agreement; or (ii) the date,
eighteen (18) months from the date of termination of Executive's employment for
whatever reason, including without limitation, the expiration of this Agreement,
but only so long as payments are made pursuant to Paragraph 7.1 or, to the
extent that the Restricted Period extends beyond the date of the last payment
made pursuant to Paragraph 7.1, so long as additional payments of the same
amounts and frequency continue to be made for the remainder of the Restricted
Period, Executive covenants and agrees that he will not, without the express
approval of the Board of Directors, directly or indirectly anywhere in the
Restricted Territory, as defined below:
(a) engage in any business for his own account;
(b) enter into employment for, or render any services to any
person engaged in any business; or
(c) become interested in any person engaged in any business
directly or indirectly, as an individual, partner, shareholder,
officer, director, principal, agent, employee, trustee, consultant or
in any other relationship or capacity;
8
9
if such business is competitive directly or indirectly, with the Company
Business and substantially injurious to the Company's or Quintiles' financial
interests; provided, however, that Executive may own, directly or indirectly,
solely as an investment, securities of any entity if Executive (a) is not a
controlling person with respect to such entity and (b) does not, directly or
indirectly, own five percent or more of any class of the securities of such
entity.
For purposes of this Agreement, "Restricted Territory" shall mean: (i)
any city, metropolitan area, country (or similar political subdivisions in
foreign countries) in which the Company is located or does, or, during
Executive's employment with the Company, did business; (ii) any city,
metropolitan area, county (or similar political subdivisions in foreign
countries) in which the Executive's substantial services were provided, or for
which Executive had substantial responsibility, or in which Executive performed
substantial work on Company, or the Company's affiliates', including Quintiles',
projects while employed by the Company.
12.3 Trade Secrets: Confidential Information: Executive covenants and
agrees that at all times during and after the Restricted Period, he shall keep
secret and not disclose to others or appropriate to his own use or the use of
others any trade secrets, or secret or confidential information or knowledge
pertaining to the Company Business or the affairs of the Company or any of its
affiliates, including Quintiles, including without limitation trade know-how,
trade secrets, consultant contracts, customer lists, pricing policies,
operational methods, marketing plans or strategies, product development
techniques or plans, business acquisition plans, new personnel acquisition
plans, technical processes, designs and design projects, inventions and research
projects; provided, however, that the following shall not constitute a breach or
violation of this Paragraph: any disclosure made by the Executive in the course
of his employment by the Company as provided in this Agreement, or any
disclosure reasonably believed by Executive to be compelled by law or legal
process. Information shall not be deemed confidential or secret for purposes of
this Agreement if it is generally known in the industry.
12.4 Employees of the Company. During the Restricted Period, Executive
shall not directly or indirectly hire away or solicit to hire away from the
Company or any of its affiliates, including Quintiles, any employee of the
Company or its affiliates, including Quintiles.
12.5 Property of the Company: All memoranda, notes, lists, records and
other documents (and all copies thereof) made or compiled by Executive or made
available to Executive during his employment by the Company concerning the
business or affairs of the Company or any of its affiliates, including
Quintiles, other than any of such which may also pertain personally to
Executive, shall be the exclusive property of the Company and shall be delivered
to the Company promptly upon the termination of Executive's employment with the
Company or at any other time on request by the Board of Directors of the Company
or such affiliates.
12.6 Rights and Remedies Upon Breach: If Executive breaches, or
threatens to commit a breach of, any of the provisions of Paragraphs 12.2
through 12.5 of this Agreement (collectively, the "Restrictive Covenants") the
Company shall have the following rights and remedies, each of which shall be
independent of the other and severally enforceable, and all of
9
10
which shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company: (a) the right and remedy to have any of the
Restrictive Covenants specifically enforced by any court having jurisdiction and
in Tennessee by an arbitration panel as provided in Paragraph 15 of this
Agreement (with respect to Paragraph 12.2, at any time during the eighteen (18)
month period following termination, but not thereafter; provided, however,
Executive recognizes that, if he should breach any of the provisions of
Paragraph 12.2, following such eighteen (18) month period, then the Executive
shall be entitled to no further payments from the Company), it being hereby
acknowledged and agreed by Executive that any such breach or threatened breach
will cause irreparable injury to the Company and that money damages will not
provide an adequate remedy to the Company; and (b) the right and remedy to
require Executive to account for and pay over to the Company all compensation,
profits, monies, accruals, increments or other benefits derived or received by
Executive as a result of any transactions constituting a breach of any of the
Restrictive Covenants, and Executive shall account for and pay over such
benefits to the Company.
12.7 Severability of Covenants: If it is determined that any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall not thereby be affected and shall
be given full effect, without regard to the invalid portions. If it is
determined that any of the Restrictive Covenants, or any part thereof, is
unenforceable because of the duration of such provision, the geographical area
covered thereby, or any other determination of unreasonableness of the
provision, the arbitration panel making such determination shall have the power
to reduce the duration, area or scope of such provision and, in its reduced
form, such provision shall then be enforceable and shall be enforced.
13. Notice: All notices, requests, demands and other communications given under
or by reason of this Agreement shall be in writing and shall be deemed given
when delivered in person or when mailed, by certified mail (return receipt
requested), postage prepaid, addressed as follows (or to such other address as a
party may specify by notice pursuant to this provision):
(a) To the Company:
ENVOY Corporation
00 Xxxxxxx Xxxxxxxxx, Xxxxx 600
Two Lakeview Place
Nashville, Tennessee 37214
(b) To the Executive:
Xxx X. Xxxxx
00 Xx. Xxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
14. Controlling Law and Performability: The execution, validity, interpretation
and performance of this Agreement shall be governed by the law of the State of
Tennessee.
10
11
15. Arbitration: Any dispute or controversy arising under or in connection with
this Agreement shall be settled by arbitration in Nashville, Tennessee. In the
proceeding the Executive shall select one arbitrator, the Company shall select
one arbitrator and the two arbitrators so selected shall select a third
arbitrator. The decision of a majority of the arbitrators shall be binding on
the Executive and the Company. Should one party fail to select an arbitrator
within five days after notice of the appointment of an arbitrator by the other
party or should the two arbitrators selected by the Executive and the Company
fail to select an arbitrator within ten days after the date of the appointment
of the last of such two arbitrators, any person sitting as Judge of the United
States District Court for the Middle District of Tennessee, Nashville Division,
upon application of the Executive or the Company shall appoint an arbitrator to
fill such space with the same force and effect as though such arbitrator had
been appointed in accordance with the first sentence of this Paragraph 15. Any
arbitration proceeding pursuant to this Paragraph 15 shall be conducted in
accordance with the rules of the American Arbitration Association. Judgment may
be entered on the arbitrators' award in any court having jurisdiction.
16. Expenses: The Company will pay or reimburse the Executive for all costs and
expenses (including arbitration and court costs and attorneys' fees) incurred by
the Executive as a result of any claim, action or proceeding arising out of, or
challenging the validity, advisability or enforceability of this Agreement or
any provision thereof.
17. No Obligation to Mitigate: The Executive shall not be required to mitigate
the amount of any payment provided for in Paragraph 7 by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Paragraph 7 be reduced by any compensation earned by the Executive as a result
of employment by another employer or otherwise.
18. Additional Instruments: The Parties shall execute and deliver any and all
additional instruments and agreements that may be necessary or proper to carry
out the purposes of this Agreement.
19. Entire Agreement and Amendments: This Agreement contains the entire
agreement of the Parties relating to the matters contained herein and supersedes
all prior agreements and understandings, oral or written, between the Parties
with respect to the subject matter hereof, provided, however, that nothing
herein shall affect in any respect the rights and obligations of the Company and
the Executive under any Incentive Agreements implemented prior to the date of
this Agreement and not expressly referred to herein. This Agreement may be
changed only by an agreement in writing signed by the Party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
20. Severability: If any provision of the Agreement is rendered or declared
illegal or unenforceable by reason of any existing or subsequently enacted
legislation or by the decision of any arbitrator or by decree of a court of last
resort, the Parties shall promptly meet and negotiate substitute provisions for
those rendered or declared illegal or unenforceable to preserve the original
intent of this Agreement to the extent legally possible, but all other
provisions of this Agreement shall remain in full force and effect.
11
12
21. Assignments: The Company may assign (whether by operation of law or
otherwise) this Agreement only with the written consent of the Executive, which
consent shall not be withheld unreasonably, and in the event of an assignment of
this Agreement, all covenants, conditions and provisions hereunder shall inure
to the benefit of and be enforceable against the Company's successors and
assigns. The rights and obligations of Executive under this Agreement are
personal to him, and no such rights, benefits or obligations shall be subject to
voluntary or involuntary alienation, assignment or transfer.
22. Effect of Agreement: Subject to the provisions of Paragraph 21 with respect
to assignments, this Agreement shall be binding upon the Executive and his
heirs, executors, administrators, legal representatives and assigns and upon the
Company and its respective successors and assigns.
23. Execution: This Agreement may be executed in multiple counterparts each of
which shall be deemed an original and all of which shall constitute one and the
same instrument.
24. Waiver of Breach: The waiver by either Party of a breach of any provision of
the Agreement by the other Party shall not operate or be construed as a waiver
by such Party of any subsequent breach by such other Party.
* * * * * *
12
13
IN WITNESS WHEREOF, the Parties have executed this Amended and Restated
Employment Agreement as of March 30, 1999.
ENVOY CORPORATION
By: /s/ Xxxx Xxxx
-----------------------------------
Name: Xxxx X. Xxxx
Title: Co-Chief Executive Officer
EXECUTIVE
By: /s/ Xxx X. Xxxxx
-----------------------------------
Name: Xxx X. Xxxxx
14
EXHIBIT A
1. Assumptions
(a) Employee has option to acquire 10,000 shares at $10.00 per
share on January 1, Year 5.
(b) An event occurs that accelerates the exercise of the option to
January 1, Year 4.
(c) Shares trade at $20.00 per share on January 1, Year 4.
(d) 120% of the applicable federal rate is 6.00% (compounded
semiannually).
(e) All payments are subject to the excise tax of 20%.
(f) In addition to an accelerated option, Employee receives a
termination payment of $32,259 on January 1, Year 4.
2. Computation of Excise Parachute Payment Subject to Excise Tax
(a) Accelerated payment ($10.00 spread x 10,000 shares) = $100,000
(b) Amount by which the accelerated payment exceeds the
present value of the payment absent acceleration
($100,000 - $94,259) = $5,741
(c) 1% of accelerated payment multiplied by the number of
full months between the date of acceleration and the
date the employee would have received payment absent
acceleration
(.01 x $100,000 x 12) = $12,000
(d) Portion of accelerated payment subject to Excise Tax = $17,741
(e) Termination payment subject to Excise Tax = $32,259
3. Excess Parachute Payment Subject to Excise Tax = $50,000
4. Excise Tax on Item 3 @ 20% = $10,000
5. Total Additional Amount Under Agreement = $24,752
15
EXHIBIT A CONT.
6. Verification of Total Additional Amount
(a) Excise Tax on additional $24,752 @ 20% $4,950
(b) Federal Income Tax on $24,752
(i) Additional Income $24,752
(ii) (State Income Tax Deduction 0
-------
(iii) Net Additional Federal Taxable Income $24,752
(iv) Federal Income Tax @ 39.65 $9,802
(c) Total Taxes on Additional Amount $14,752
(d) Net Amount Available to Key Employee to Pay
Excise Tax in #2 $10,000
The formula used to compute the Additional Amount is to divide the Excise Tax
amount on the excess parachute payment by a percentage equal to 100% less the
sum of the Excise Tax percentage plus (the state income tax percentage) plus the
federal tax percentage less a percentage determined by multiplying the federal
tax percentage times the state tax percentage. Thus, in the example above, the
following percentages should be subtracted from 100%:
1) Excise Tax Percentage 20.00%
2) Assumed State Tax Percentage - 0.00%
3) Federal Income Tax Percentage - 39.60%
------
Total 59.60%
Less 39.6% Times 0% - 0.00%
------
59.60%
The resulting percentage of 100%-59.60%=40.40% should be divided into
$10,000=$24,752.
